By Matija Šerić
During President Joe Biden’s two-day visit to Hanoi on September 10-11, the US President and General Secretary of the Communist Party of Vietnam, Nguyen Phu Trong, reached a historic agreement on a comprehensive strategic partnership between the two countries. After the conclusion of the agreement, Vietnamese Prime Minister Pham Minh Chinh met with various US officials in Washington and San Francisco during his trip to the US on the occasion of the 78th session of the UN General Assembly in New York. The goal was to encourage the implementation of the agreement.
Although the United States and the Socialist Republic of Vietnam normalized diplomatic relations back in 1995, the latest transformation of relations to the level of a comprehensive strategic partnership represents a significant change, not only for both countries but for the entire Asian geopolitical picture.
On Vietnam’s side, strengthening relations with the US will facilitate efforts for the communist country to realize its enormous economic potential and will strengthen its defense capabilities in the context of the Chinese threat in the neighborhood. On the US side, strengthening relations with Vietnam will provide greater opportunities for trade, including in strategic sectors such as microchip manufacturing. At the same time, America gets the opportunity to cooperate militarily with a regional power of about 100 million inhabitants in the strategically extremely important area of Southeast Asia.
The historical path of rapprochement
The above lines to uninitiated observers might seem like a joke. Even those who are less familiar with history know about the US involvement in the Vietnam War, which led to the death of over 3 million Vietnamese and about 60 thousand American soldiers. The Vietnam War was the first war that the USA lost (until Afghanistan) and it remains the most terrible war after 1945. Nevertheless, over time, the Vietnamese and Americans did not remain prisoners of a cruel history like the Turks and Armenians, but turned a new page of relations. Or, rather, they were forced to do so by geopolitical reality.
The mending of relations began little by little after the end of the Vietnam War in 1975. The mistrust and hostility between the two sides was difficult to overcome. Importantly, Hanoi initiated liberal economic reforms during the late 1980s. The opening of the US Office of Prisoners of War and Missing in War in Hanoi, along with humanitarian aid, contributed to the thawing of relations between the two nations. President Bill Clinton’s decisions were to lift the trade embargo in 1994 and normalize relations in 1995. Reconciliation was undoubtedly facilitated by concrete moves by both countries to heal the horrors of war. The efforts of Senator John McCain, a former Navy pilot and prisoner of war, and his fellow veteran and Senator John Kerry, had the effect that the US Congress adopted a new policy towards Hanoi. In addition, Vermont Democratic Senator Patrick Leahy played a key role in persuading Congress to approve aid for Vietnamese citizens who had been injured by mines and explosive devices.
Although Vietnam was one of the poorest countries in Asia in the early 1990s, thanks to the mentioned socialist market reforms, by Doi Moi, from the end of the 1980s until today, Vietnam has recorded three and a half decades of rapid economic growth. Total nominal GDP last year was 406 billion USD (34th place in the world). Foreign direct investment reached an all-time high of $22.4 billion in 2022. The results of the first quarter for 2023 are also a record – 10.13 billion USD, and estimates say that by the end of the year direct investments could reach as much as 36 billion USD.
Realistic estimates say that by 2050, the Vietnamese economy will be the 10th largest economy in the world. Economic experts classify Vietnam in the group of Next-11 countries, which also include Egypt, Mexico, Nigeria, Iran, Pakistan, Bangladesh, Indonesia, the Philippines, South Korea and Turkey, which will be among the largest world economies of the 21st century. Vietnam’s economy faces challenges, including persistent poverty, social inequalities, environmental problems, underdeveloped infrastructure, corruption and non-transparent governance as a direct result of the communist system.
The normalization of relations led to a large increase in trade between the two countries, which has since increased more than 200 times. Foreign direct investment from the United States to Vietnam has grown from less than $1 billion in 2011 to over $2.6 billion in 2019. Many Americans choose to travel specifically to Vietnam, which has helped the hosts boost their tourism industry. American schools and companies have attracted thousands of Vietnamese students. American cooperation has helped Vietnam, which still leads the way as a developing nation, have a literacy rate of nearly 98%. The foundation of the educational cooperation is the impressive new Fulbright Vietnam University located in Ho Chi Minh City. Founded in 2016, it is the first fully independent, non-profit university in the country and a cornerstone of the US-Vietnam partnership. The university is modeled after the American one, but it is also adapted to the Vietnamese culture.
Vietnamese needs and American opportunities
In order to avoid falling into the trap of middle-income countries (impossibility of rising standards), Vietnam must refine its economy in a thoughtful way. Combined with continued domestic reforms, a partnership with the US can help. The strengthening of Hanoi’s ties with Washington provides new opportunities for reorienting the economy. Instead of exporting simple goods and labor-intensive industrial products, Hanoi moves to the production and export of goods and services of higher value. Green and other technologies, microchip production, higher education assistance, and military cooperation are fields where US investment can help Vietnam’s interests.
Vietnam’s energy and environmental infrastructure require investment in the near future. The industry needs to be sophisticated to comply with the principles of a sustainable economy. The Vietnamese workforce, despite being skilled and highly motivated, requires continuous training. US investment and aid in the fields of energy, environment, IT sector and higher education will demonstrate Washington’s long-term commitment to Vietnam’s prosperity and security, while protecting Vietnam from dependence on its northern neighbor.
Results of cooperation
The US and Vietnam have cooperated on various security projects, such as assistance to the Vietnamese Coast Guard, the fight against international crime (trafficking in people, drugs, chemical substances and animals) and illegal fishing. The anti-corruption efforts led by Trong have won recognition from American investors. Under his leadership, Vietnam has made significant progress on Transparency International’s Corruption Perceptions Index. However, further work is needed as Vietnam currently ranks only 77th out of 189 countries.
A key part of Vietnam’s economic strategy is attracting high-tech foreign investment. The US has turned Vietnam into an important high-tech and semiconductor hub in Asia. The $15.5 billion Just Energy Transition Partnership was launched last year. It brings significant investment to Vietnam so that it can achieve ambitious targets for limiting greenhouse gas emissions – the goal is that by 2030 47% of Vietnam’s electricity generation come from renewable energy sources. Over the past five years, USAID support has fueled more than $300 million in solar and wind investments.
The United States has emerged in Vietnam with more than 52 multinational corporations such as Apple, Boeing, Lockheed, Meta and Space X. American investment is crucial in realizing Vietnam’s goal to develop its digital economy. Based on a report jointly produced by Google, Bain and Temasek, Vietnam’s digital economy is predicted to reach a value of over $49 billion by 2025. The lifting of the post-war arms embargo in 2016 was another factor in the development of relations. As a result, the United States has exported defense platforms such as Boeing ScanEagle drones and patrol boats to support Vietnam’s efforts to maintain stability and peace in the South China Sea.
The role of China in Vietnam-US relations
Despite the historical similarity with China (struggle against Western colonialism, socialist system) Vietnamese leaders and people are afraid of Chinese expansionism. A partnership with the US will give Vietnam greater economic independence from China. The Vietnamese can continue to trade with China, which remains their largest trading partner, while at the same time reducing their economic dependence on China. That seems like a winning combination.
Over the past few years, as Sino-US relations have deteriorated, Beijing has sought to expand its investment in Vietnam and has skillfully and covertly used Vietnam as a platform to export its products to the US market. Due to poor relations with China, the Vietnamese government and companies are increasingly recognizing the importance of reducing over-reliance on Chinese-dominated supply chains and technologies. Because of the trade war with Beijing, some US companies have sought to diversify their supply chains outside of China. Proximity to China, along with Vietnam’s improving business environment, have made Vietnam one of the few profiteers of the US-China trade war.
Given China’s geographical proximity, economic ties, complicated history and communist character of both countries, it is easy to understand why Vietnam’s foreign policy approach is cautious. The goal of the Vietnamese is not to anger Beijing and at the same time to protect themselves from it.
The point over which the two countries clash the most is the issue of sovereignty over disputed waters and islands in the South China Sea. The Vietnamese are worried about Beijing’s efforts to aggressively take control of the Spratly and Paracel Islands. The South China Sea is a vital maritime route, an important fishing destination and a source of considerable natural resources (oil and gas). Over the past ten years, China has stepped up its naval patrols and island dredging, which has led to clashes with Vietnamese ships. China’s navy, coast guard and ships regularly enter what the Vietnamese consider their exclusive economic zone. China’s aggressive approach has pushed Vietnam towards the US, as America does not recognize China’s demands.
However, Chinese assertiveness does not stop there. Beijing continues to build dams on the Mekong River – Asia’s third-largest transboundary river that stretches nearly 5,000 kilometers through six countries where it serves as a primary or secondary source of food for millions of people. China’s damming of the river creates food insecurity due to lower crop yields resulting from poorer irrigation. Reduced water flow will affect the economies of Southeast Asian countries downstream, most notably Vietnam. Experts believe that a dam on the Mekong will increase food prices and cause hunger, reducing the productivity of workers. Chinese hackers occasionally attack Vietnamese companies. Therefore, relying on Chinese IT infrastructure is unwise.
“Three no” policy
The Vietnamese skilfully levitate between the great powers in foreign policy. Vietnam’s foreign policy is popularly called the “Three No’s” and is based on balancing relations with global powers. By maintaining friendly relations with Russia, China and the USA through the principle of “Three No’s” – no military alliances, no military bases of foreign countries in Vietnam and no reliance on one country – it aims to prevent economic and military dependence on any partner.
This is well demonstrated by Vietnam’s comprehensive strategic partnerships signed with China (2008) and Russia (2012) and the US (2023). Since 2014 when China’s installation of a huge oil rig near Vietnam’s coast caused tensions, Hanoi has made concerted efforts to strengthen its ties with other countries, forming comprehensive strategic partnerships with India in 2016 and South Korea in 2022. More earlier strategic partnerships were achieved with UK in 2010 and France in 2013. The trend continues. In August this year, Vietnam announced the signing of three additional comprehensive strategic partnerships with Australia, Indonesia and Singapore.
Paradoxical as it may sound, the strategic interests of the US and Vietnam are compatible, at least for the time being. Vietnam and the US share the strategic goals of preventing Chinese dominance in Southeast Asia and maintaining an international order based on neutral rules in the South China Sea. In this context, signing a comprehensive strategic partnership is an important step to ensure an independent foreign policy and internal stability. Vietnam’s restructuring of the economy requires rapid adjustment by domestic manufacturers, and the Americans can offer the necessary long-term investment. Likewise, in protecting its territorial integrity, Vietnam will profit from American intelligence and military assistance. Improved ties with the US also strengthen Vietnam’s position in global supply chains. However, Vietnam will not cut its extensive economic ties with China or Russia, nor has it ever intended to.
Raised to a higher level, Vietnam’s partnership with the US aims to maximize Hanoi’s opportunities in geopolitical relations. Vietnam is one of the few countries on the planet that can maintain close relations with all major powers. Having “comprehensive strategic partnerships” with all three major powers, Vietnam feels it can freely maneuver between them. Vietnamese can take a position that best suit their national interests without taking a specific side in a great power conflict. Thus, for example, in March 2022 and February 2023, at the UN, Hanoi abstained from voting on resolutions condemning the Russian invasion of Ukraine. At the same time, the visits of Russian high officials to Vietnam are frequent. According to the latest information, Hanoi plans to buy larger quantities of Russian weapons worth $8 billion despite potential US sanctions.
Zones of conflict still exist in Vietnam-US ties. Washington will continue to encourage Hanoi to adhere to the UN Universal Declaration of Human Rights. Vietnam, like all other Marxist-Leninist states (former and existing), is a serious violator of human rights. At the same time, Hanoi will demand that Washington do more to atone for the untold damage done half a century ago and to avoid moralizing about human rights, given human rights abuses in the US and its partners such as Saudi Arabia and Qatar. The US-Vietnam partnership seems stable, but due to its bloody history and Vietnam’s skillful avoidance of alignment in geopolitics, it will never reach the level that the US has with South Korea, Japan and Australia.